A Labour source said Keir Starmer would “take responsibility” for the result as the party’s left-wing demanded the leader “urgently change direction”.
The seat has been Labour since its creation in 1974. But Conservative Jill Mortimer has been elected Hartlepool’s new MP with a majority of 6,940, a 16% swing from Labour to the Tories.
It is highly unusual for a governing party to win a by-election.
Hartlepool was held by Labour with a majority of 3,595 in 2019, even as other bricks in the red wall crumbled – in part due to the Brexit Party splitting the Tory vote.
Shadow communities secretary Steve Reed admitted it was an “absolutely shattering” defeat.
But Reed insisted the party would double down on the more centrist approach taken over the past 12 months.
“What this shows is that, although we have started to change since the cataclysm of the last general election, that change has clearly not gone far enough in order to win back the trust of the voters,” he told BBC Breakfast.
The victory cements the Tory party’s growing popularity in the north of England following the 2019 general election, where a string of seats in Labour’s traditional heartlands fell to Boris Johnson’s party.
Early results in council contests elsewhere also appeared to show voters deserting Labour, as ballots continue to be tallied up across England, Scotland and Wales following the “Super Thursday” polls – the largest test of political opinion outside a general election.
The Tories seized Redditch and Nuneaton and Bedworth councils in the Midlands from Labour, along with Harlow in Essex, while Starmer’s party saw heavy losses across North East local authorities.
A Labour source said Starmer would “take responsibility for these results” as he sought to “win back the trust and faith of working people”.
“The message from voters is clear and we have heard it – Labour has not yet changed nearly enough for voters to place their trust in us,” they said.
“We understand that. We are listening. And we will now redouble our efforts.”
In a sign of the discontent on the Labour left, MP Lloyd Russell-Moyle appeared to mock the party’s attempts to change its image. He said: “Good to see valueless flag waving and suit wearing working so well … or not?”
Richard Burgon, a shadow cabinet minister during Jeremy Corbyn’s time as leader, said the result in Hartlepool showed the party was “going backwards in areas we need to be winning”.
“Labour’s leadership needs to urgently change direction. It should start by championing the popular policies in our recent manifestos - backed by a large majority of voters.”
And former shadow home secretary Diane Abbott said it had been a “crushing” defeat. “Not possible to blame Jeremy Corbyn for this result. Labour won the seat twice under his leadership. Keir Starmer must think again about his strategy,” she tweeted.
Following the Hartlepool declaration, attention will turn to results elsewhere as ballots continue to be counted across England, Scotland and Wales in the largest test of political opinion outside a general election.
Results from the Holyrood election – where the issue of Scottish independence was a main feature in the campaign – will come through later on Friday and Saturday.